Red Sun Pharmaceutical issued an announcement: in the first quarter of 2023, the company achieved operating income of 1,659 million yuan, a year-on-year decrease of 4.23%; realized operating profit of 198 million yuan, a decrease of 23.14% over the previous year; and Guimu's net profit was 175 million yuan, down 26.35% from the previous year.
Key points of investment
The formula pellet business is in the standard switching stage. The company's revenue for the first quarter of 2023 was 1,659 million yuan, down 4.23% from the previous year; Guimu's net profit was 175 million yuan, down 26.35% from the previous year, mainly due to fluctuations in the performance of the traditional Chinese medicine formula pellets and tablets business. Since the pilot of formula pellets ended on November 1, 2021, enterprise standards have gradually been switched to national standards and provincial standards. 2022 is in the national standard switching stage. Due to factors such as hospital channel inventory, incomplete number of varieties, and provincial standard filing, the company's formula pellet business declined. The company's net profit for the first quarter of 2023 was 175 million yuan, an increase of 14.37% over the previous quarter. As of April 27, there were 248 national standard varieties and 43 varieties in the publicity period. In line with the provincial standard filing, the number of formula pellets sold continued to increase. The formula pellet channel inventory will gradually be digested, and sales will gradually recover as the number of registered varieties increases.
Diverse product lines, overall industry chain layout
In terms of finished drugs, since 2010, the main product, hepibicin injection, has been included in 23 diagnostic and treatment guidelines and expert consensus. There is abundant evidence-based medical evidence. At the same time, it has been included in category B of the “National Medical Insurance Drug Catalogue” and has continued to be released. In terms of medical devices, it covers a series of products such as oxygen, ECG, blood pressure, fetal heart meter, body temperature, multi-parameter monitoring, health physical examination, all-in-one computer, etc., and has successively passed certification from countries such as China's NMPA, the European Union CE, the US FDA, and Canada's MDL. The medical and health service business uses digital operation methods to quickly build offline channels and online traffic scale, deeply build a closed-loop ecosystem of “own herbal medicine supply chain+own online platform+own offline medical clinic”, and enhance the accessibility of high-quality traditional Chinese medicine resources. With the deepening of development in various fields, the company made rapid progress in transformation from an outstanding domestic manufacturer of traditional Chinese medicine to a service provider in the health industry.
Profit forecasting
We forecast that the company's 2023E-2025E revenue will be 75.97, 89982, and 10.628 billion yuan respectively, net profit of 654, 835, and 1,113 billion yuan respectively, and EPS of 0.22, 0.28, and 0.37 yuan respectively. The current stock price corresponding to PE is 26.6, 20.9 and 15.7 times, respectively, giving a “buy” investment rating.
Risk warning
Risks such as market development falling short of expectations, changes in raw material costs, and changes in procurement or bid prices.